MONTPELIER — The state’s tax revenues continued to outperform projections for a fourth consecutive month in October, but officials are warning that the better-than-expected cash flow into the state’s coffers should not be seen as a sign that Vermont’s finances are out of the woods.
The state Emergency Board, meeting in August, adopted updated projections for Fiscal 2021 that reflected the likelihood of sharp declines in revenue due to the COVID-19 pandemic.
The state is $82.3 million ahead of the August forecast for the first four months of fiscal 2021. But it’s still trailing the pre-COVID revenue projections — the revenue streams that were used to budget for salaries and benefits, schools, public safety, social safety net programs, highways, outdoor recreation and other uses.
“Higher than anticipated revenue in the General Fund, while certainly welcome, is based on a substantially reduced revenue target adopted in August due to the pandemic,” Secretary of Administration Susanne Young said in a prepared statement. “Lingering effects of the strong economy prior to COVID are carrying into the early part of the 2020 fiscal year, however we are braced for more sobering fiscal results immediately ahead of us.”
Scott administration financial officials and legislative leaders have warned that the Fiscal 2022 budget could be a much tougher nut to crack than the 2021 budget, especially if the federal government fails to provide additional aid. The FY21 state budget was bolstered by billions of dollars in federal assistance.
In data released Friday, the Agency of Administration said it collected $118 million in General Fund tax revenue. That’s $4.63 million more than anticipated when the state’s top economists set consensus projections for the year in August.
Since fiscal 2021 started on July 1, General Fund revenues are beating those targets by $53.9 million, or 8.46 percent.
The state sets its budget based on tax revenues that are dedicated to three main funds: the General Fund, the Transportation Fund, and the Education Fund. Every year, the state’s economic experts project how much money those funds will raise, and budget writers for the administration and the Legislature plan accordingly.
“While we are pleased to have had the wind at our back over the past several months, evidence suggests this situation will not continue through the remaining eight months of this fiscal year. Our revenue is still substantially below the pre-COVID revenue forecast for the State, and difficult and uncertain economic circumstances lay ahead due to the pandemic,” Young said.
Revenues rolling into the Transportation Fund are beating projections at an even brisker pace. According the state, the fund collected $25.3 million — $3.27 million, or 14.8 percent, more than expected
That increase was driven by motor vehicle purchase and use taxes, which are 44.1 percent higher than what the projections expected. For Fiscal 2021, Transportation Fund revenue is $5.2 million, or 5.94 percent, above forecasts.
The Education Fund collected $56.4 million in October. That’s $10.38 million, or 22.57 percent, above the forecasted monthly target, the state said. Sales and use tax revenue of $8.83 million, 23.3 percent above expectations, is being credited for that increase.
Year-to-date, the Education Fund is $23.7 million, or 13.1 percent, above its consensus forecast.